erp the next generation - netsuite · source: mint jutras 2011 and 2013 erp solution studies...

May 2013

ERP, THE NEXT GENERATION: THE FINAL FRONTIER?

TURNING YOUR BUSINESS INTO A STARSHIP ENTERPRISE

As the latest movie of the Star Trek franchise comes to a theater near you, let’s go out on a limb here and draw some parallels between Enterprise Resource Planning (ERP) and this entertainment phenomenon that began in 1966 by chronicling the interstellar adventures of the fictitious starship Enterprise. Like the USS Enterprise, whose five-‐year mission it was to explore new worlds and “to boldly go where no man has gone before,” early versions of ERP charted new territory for enterprise applications. It evolved from MRP (material requirements planning) to MRP II (manufacturing resource planning) and then boldly set out to conquer the “final frontier” of ERP, managing not a small piece of the enterprise, but the enterprise itself. And like the Star Trek franchise, after playing on both large and small screens for more than two decades, a “next generation” was born: faster, more technologically enabled and more in tune with the evolving needs of the galaxy.

This next generation of ERP continues to evolve, but are you evolving with it? Or are you stuck in the darkness of the 20th century?

STAR TREK: THE SERIES, THE MOVIE, THE SOFTWARE

Like the voyages of Star Trek that tested the nerves of the captain and crew of the USS Enterprise, ERP has often been an adventure, testing the nerves of CIOs and line of business executives at the helm of the enterprise. As the USS Enterprise explored the far reaches of the galaxy, it encountered alien cultures and new and different life forms. Traditional means of communication and familiar methods of interaction became ineffective. As businesses began routinely expanding beyond international boundaries, distances increased by orders of magnitude and they too experienced new cultures, new languages, new regulatory and reporting requirements and new ways of doing business.

The USS Enterprise had at its disposal amazing technology that allowed the starship to change course and even reverse direction immediately. It could travel at warp speed, using a hypothetical faster-‐than-‐light propulsion system. Star Trek was, and still is science fiction. In contrast, next generation, technology-‐enabled ERP solutions are very real. They help us cope with the accelerating pace of business, growing volumes of data and higher customer

ERP, The Next Generation: The Final Frontier? of 9

expectations. Yet, few can turn on a dime and unlike Star Trek’s USS Enterprise, ERP can’t operate at warp speed. Or can it? We are now entering a new phase of ERP’s evolution. New in-‐memory databases and technology are now dramatically speeding up run times and eliminating the need for batch processes.

But few are taking advantage of this new technology. The entire gamut of different generations of MRP and ERP are still in operation across the planet today, producing a wide range of value from very low to very high. To many, modern technology-‐enabled solutions might still seem the stuff of science fiction when in fact they are in production environments, producing results that are nothing short of amazing. What generation of ERP are you running today? Have you explored the world of very real possibilities recently? If not, are you missing out and losing ground in terms of competitive advantage?

NEXT GENERATION ERP

If you are running an older ERP solution, especially those implemented prior to the year 2000 (Y2K), you may not even be aware of what you can expect from a modern, technology-‐enabled, next generation ERP. For many, many years ERP selection was largely driven by fit and functionality. Even today, Mint Jutras ERP Solution Study survey respondents put fit and functionality close to the top of the list of selection criteria (see sidebar).

As a result, the footprint of ERP has grown steadily, to the point where it is sometimes hard to figure out where ERP ends and other applications begin. But it isn’t the depth and breadth of functionality that qualifies an ERP solution as “next generation.” It is the underlying technology. And conversely, it is that new technology that enables ERP footprints to expand at an accelerated rate.

Unless you are a technologist (and most business executives are not), you might not know or care about that underlying technology, because you don’t understand it. But it is dangerous to ignore it simply because of what it can do for you. You don’t know how the USS Enterprise achieved warp speed, but you know that it can. You don’t know how the transporter beam works, but you know what happens when Captain Kirk says, “Beam me up, Scottie.” You don’t need to know how the development platform allows your solution provider to deliver more innovation, but it is important that you understand the potential. It is far less important to understand how this new technology works than it is to know what it can do for you.

THE NEW BASICS The “basics” of ERP used to be defined by basic functionality required by all types of companies. Basics usually referred to core modules of ERP: general ledger, accounts payable, accounts receivable, order management, purchasing and inventory control. For manufacturers it also included MRP and the basic

ERP Selection Criteria In the 2013 Mint Jutras ERP Solution Study, survey participants were asked to rank the importance of selection criteria on a scale of 0 (not a consideration) to 4 (must have/most important). Criteria are shown in order of importance below:

ü Ease of use

ü Fit and Functionality

ü Flexibility to address changing business needs

ü Integration technologies and capabilities

ü Quality and availability of vendor support services

ü Ease and speed of implementation

üMust be an integrated end-‐to-‐end solution (preferred over multiple point solutions)

ü Total cost of ownership

ü Ability to tailor functionality without programming

ü Level of industry-‐specific expertise available from vendor/ partners

ü Software Cost

ü Availability of your single preferred deployment option (SaaS, Hosted, on-‐premise)

ü The ability to access ERP data and functions through a mobile device

üHaving a choice of different deployment options (SaaS, Hosted, on-‐premise)


requirements to schedule, create and manage production orders. Those modules are still important today but “basic” functionality has become somewhat of a commodity. Forty-‐three percent (43%) of survey respondents to the 2013 Mint Jutras ERP Solution Study would consider purchasing core ERP functions like a monthly utility and realigning their selection team to focus on the remaining “value-‐add” to produce strategic or competitive advantage, or simply to cut costs.

Basics now extend to include some advanced technology modules like work flow, event management (triggers and alerts), process modeling and enterprise portals. Yet, unlike basic functional modules, which are fully implemented by the majority of our survey respondents, these technology basics, including business intelligence and analytics, are still largely under-‐utilized -‐ even as we gain ground in adoption.

Table 1: Advanced Technology Modules -‐ Fully Implemented

Source: Mint Jutras 2011 and 2013 ERP Solution Studies

Older legacy solutions may not even include these technology options in their portfolios, but any next generation ERP certainly will.

What else should you be looking for? Without fully understanding the technology platform upon which “next generation” ERP solutions are built it may be difficult to recognize them. Here are a few hints you can listen for as vendors describe their offerings: service oriented architecture, object-‐oriented data models, event-‐driven and/or message-‐based technology, semantic layers, mobility, rules engines, in-‐memory databases, HTML5 and XML. What all these boil down to are new ways of engaging with ERP, ease of configuration versus customization, better integration capabilities and new ways of delivering innovation.

NEW WAYS OF ENGAGING WITH ERP Traditionally users have engaged with ERP through a hierarchical series of menus, which require at least a rudimentary knowledge of how data and processes are organized. Hopefully this organization reflects how the business processes and the enterprise itself are structured, but with a hierarchy of menus, there are no guarantees. And therefore there are no guarantees that navigation is intuitive or that business processes are streamlined and efficient.

43% of survey respondents to the 2013 Mint Jutras ERP Solution Study would consider purchasing core ERP functions like a monthly utility and realigning their selection team to focus on the remaining “value-‐add” to produce strategic or competitive advantage, or simply to cut costs.

Listen for terms like:

üservice oriented architecture

üobject-‐oriented data models

üevent-‐driven and/or message-‐based technology

üsemantic layers ü mobility ü rules engines ü in-‐memory databases ü HTML5 ü XML


Next generation ERP attacks this very real problem by making the user interface more intuitive and more personalized. It has been hypothesized that Star Trek’s communication devices inspired the first mobile phones, which of course evolved into today’s smart phones and tablets. Now with the introduction of so many consumer applications on mobile devices, we have all become much more demanding of user interfaces. It’s called “the consumerization of IT” and it is a very real phenomenon. We demand truly intuitive screens and touch technology.

Next generation ERP has responded to these demands with web-‐based access, making ERP accessible anywhere, anytime with an increasing number of functions available through mobile devices. Touch technology is making its way into the hands of ERP users. Look for this to become more pervasive and for more devices to be natively supported.

And don’t forget enterprise search functions. It is not entirely clear when “Google” became a verb, but that is indeed how we use the term today. We’re very accustomed to conducting Internet based searches on topics and questions. Next generation ERP supports those same search capabilities within its own structured data, adding a level of context not previously available. Next generation search capabilities embedded in ERP can tell the difference between searching for Phillips, your customer, and a Phillips head screwdriver.

New ways of engaging with ERP have put “Ease of Use” at the top of the leader board in terms of selection criteria. But “Ease of Use” means much more today than just an intuitive user interface. Mint Jutras 2013 ERP Solution Study participants were asked to select their top three priorities for ease of use. Results are shown in Figure 1.

Figure 1: Top 3 Most Important “Ease of Use” Issues

Source: Mint Jutras 2013 ERP Solution Study


Yet how an accounts payable clerk or a material handler interacts with ERP is (and should be) very different from how an executive decision maker engages. Line of business executives will likely keep tabs on the pulse of the business through a select number of key performance indicators (KPIs). Next generation ERP will present a customized, graphical view of those KPIs but also allow the executive to drill down to successive levels of detail. Those customized views will combine ERP with other tools including email and productivity tools such as Microsoft Office and even chat functions that can record instant messaging “conversations.” And they will be available on a myriad of devices.

CUSTOMIZATION VERSUS CONFIGURATION AND TAILORING Yes different roles in the organization require different views. And different individuals may require unique views. And what organization today doesn’t think it isn’t unique in some way? With traditional ERP based on older technology this used to mean customization.

Customization also used to mean mucking around in source code, which builds barriers to moving forward with updates and upgrades. That was because in the past all the logic was “programmed” into that source code. This made business applications like ERP rigid and inflexible. Sure, there were always some configuration options, but those options were constrained by the logic embedded in the source code.

But next generation ERP is built in layers that are removed from the source code. First and foremost there will be a user interface layer. By removing this from the source code, you can easily tailor what the users see, and how they see it, without ever touching the underlying code. This is also how translations are much more easily delivered these days, allowing different users to interface with ERP in different languages.

This means tailoring the look and feel is easy. It also means that configuration (versus customization) does not require deep technical skills and is carried forward as the software is enhanced.

In addition, there might also be a set of business rules that are created and maintained. These rules might be used to determine behavior of a function or to configure next steps in a workflow. Business rules might define different thresholds for approval (e.g. all purchase orders require approval but those over a certain value require an extra step in the approval process).

These business rules might also be used to trigger alerts, notifying managers when events occur (e.g. a big order comes in) or when they fail to occur (a scheduled delivery date is missed).

To better distinguish between configuration and customization, Mint Jutras posed the question to ERP survey participants, “What level of customization do you believe you need?” Respondents were allowed to select any or all of the options presented. Their responses are shown in Figure 2.


Figure 2: What level of customization do you believe you need?

Source: Mint Jutras 2013 ERP Solution Study

With a next generation ERP, it is highly unlikely that any of these requirements, with the possible exception of “custom logic is required” would require customization rather than configuration. And if an external rules engine is available, custom logic might also be “configured” as well.

INTEGRATION AND INNOVATION We include integration capabilities and new ways of delivering innovation as a single topic here because the technology used to deliver both are likely to be similar, if not identical. In this context, you will hear two terms bandied about: services and objects, both of which can be shared. We should also throw a third term in there: components.

Before getting into how next generation ERP delivers integration and innovation, let’s first recap how traditional ERP originally worked. Mint Jutras defines ERP as an integrated suite of modules that forms the transactional system of record of a business. This is a rudimentary definition because today ERP is likely to do much more than this, but it will serve us well in drawing a contrast between traditional and next generation ERP.

Traditional ERP was developed as a tightly integrated set of modules, with only one of everything, including master files and maintenance functions. Even though the order management and the accounts receivable modules both needed a customer master, there was only one and it was shared by both. Purchasing and accounts payable shared a supplier master file. Purchasing, shop floor control, engineering and inventory management all shared a common part master file.

Not only do all modules of an ERP solution share a common database, but all are developed using the same tools and technology and they all move forward


in lock step. This eliminates data redundancy and any need for separate integration efforts. But it also means purchasing can’t move forward until order management, shop floor control and inventory management modules are ready to move. It takes massive efforts of coordination by the vendor to make sure all the pieces of the puzzle more forward together. And it takes similarly massive efforts of coordination for all departments within their customers’ organizations to take those next steps altogether.

But what if a supplier (or, even worse, a customer) demands that your enterprise change the way you conduct business with them? What if your current solution can’t support that new way of doing business? Maybe you need to upgrade, enhance or even swap out the purchasing (or order management) module for a new solution that does. If purchasing (or order management) was a separate application you could, although that would most likely require additional effort (and cost) to integrate that separate application with ERP. And when you make a change, the integration would likely require change as well.

What if, instead, you could take that tightly integrated purchasing module of ERP and loosely couple it? That way, if you wanted to replace it you would just have to uncouple it and swap in a new one – sort of like uncoupling one of the cars on a train? It just takes a standard coupling, right? Of course it is a little more complicated than that, but that’s the general idea.

Instead of referencing supplier and item master files directly, a next generation ERP will access a standard model of a supplier or an item (a business “object”). It might have its own standard or it might use an industry standard (like OAGIS). Of course a different supplier record (being swapped in) might not be identical to the master but think of the object as sort of a Rosetta stone for supplier information. If you can map to all the elements of the object, you can map to what ERP needs. This provides a leg up when it comes to integration with other internal applications as well as interoperating with those of customers and suppliers. Point to point integration methods are replaced with a hub and spoke approach. By connecting to the hub, you can “speak” with all the different spokes.

And instead of inserting lines of code directly into the purchasing module of its ERP to maintain the supplier master file, next generation ERP might call upon a standard “service” for file maintenance or for adding a new purchase order or any number of different functions. Need to upgrade or add new functionality, simply swap out the old “service” for the new. You might also view these services as external components. Again, this is an oversimplification, but conceptually describes how next generation ERP can effectively deliver new, targeted innovation without forcing all departments served by ERP to march forward together.

OAGIS Standards OAGIS is short for The Open Applications Group Integration Specification which is a standard defined by The Open Applications Group (OAGi). OAGIS uses XML (extensible markup language) to define a common business language for information integration.

According to OAG, “OAGIS provides the definition of business messages in the form of Business Object Documents (BODs) and example business scenarios that provide example usages of the BODs. The business scenarios identify the business applications and components being integrated and the BODs that are used. The current release, OAGIS 8.0, includes 200 business messages and 61 business scenarios that can be used to integrate business applications.”


It is also how acquisitive ERP vendors can deliver more innovation to broader installed customer bases. The ERP market has been steadily consolidating for the past two decades. Many ERP vendors have grown through acquisition using one of two approaches, or combining the two:

• Some have acquired market share by buying other ERP vendors resulting in larger development staffs, but also requiring them to support (and develop?) multiple product lines.

• Others have expanded the breadth of their offering by acquiring complementary solutions. While this approach allows them to potentially grab more share of their customers’ wallet, the acquired products may or may not be fully and seamlessly integrated with their ERP offering(s).

Some vendors will have combined both approaches for growth. Using next generation “services” and “object orientation” provides more seamless integration and also allows them to develop code once and deliver across different ERP product lines.

Even if the vendor in question has not grown by acquisition, this approach also allows delivery of more innovation with less disruption to the customer. The connection will be the strongest when ERP and these components share a common platform of technology.

A FINAL STEP “INTO DARKNESS”

Have you forgotten how we started with our Star Trek analogy? The latest movie, Star Trek Into Darkness, has the crew of the USS Enterprise saving the world from destruction. So the story line doesn’t really support our analogy. ERP might help your business gain competitive advantage, but it doesn’t save the world. The title “…Into Darkness” is however quite relevant to the final stage, and perhaps the final frontier of ERP.

As the basics of ERP become more of a commodity it becomes all that much more of a basic necessity of business, including the more advanced technology that enables easier access and configuration (without customization), better integration and more innovation. As those basics become commoditized, ERP might appear to slip into the background: “The darkness” of uniformity, of non-‐differentiation. While all companies have common needs, specific industries create specialized needs and it also becomes increasingly important for companies to seek competitive differentiation. But it is not in the core functionality where this source of differentiation lies, but in the services and functions that surround the core.

So let’s continue our space analogy and imagine ERP in the center – as in the center of the solar system. Circling the sun are planets drawing sustenance in the form of light and heat, which makes them habitable. Equate habitable to


easy access and intuitive user interfaces that can be configured and personalized. In a real solar system it is gravity that holds the planets in orbit, and the source of gravity is the sun at the core. In our software solar system with ERP at its center, the gravity is drawn from the platform on which the ERP is built. Building ERP and all the surrounding applications on a common platform and standardized business objects will insure a strong connection but with a loose coupling that can be easily disconnected and reconnected.

What about other components not developed on these native platforms -‐ components that might be based on pre-‐existing or acquired technology? Of course other satellites can also be circling the sun, but it might take some additional propulsion to keep them in orbit. Similarly, it might take some remedial effort to make that older technology compatible enough to reap some of the benefits of the next generation platform.

KEY TAKEAWAYS

Next generation ERP is a far cry from traditional ERP solutions of the past. New technology platforms allow users to engage with ERP in new and different ways with intuitive and visually appealing user interfaces, which don’t rely on intimate knowledge of how the system or the data is structured. This opens doors to a whole new level of executive involvement.

Next generation solutions are more easily custom configured, eliminating invasive customization that prevents companies from moving forward with updates and upgrades. This is particularly important in light of the increased pace of innovation that is supported through the use of web-‐based services, object-‐oriented data models and component architecture. All these combine to support more rapid development of new features and functions, which are more easily consumed as needed.

If your current ERP solution has you stuck in the 20th century, look for an ERP solution that can take you into the darkness and into the light, both at the same time. Look for an ERP solution that can satisfy all your basic, generic needs, quietly in the background, but one that is built on a next generation architecture that supports rapid development and innovation and rock solid but easy integration. Pick one with sufficient gravity to hold all the necessary components in place and let your competitive advantage shine through.

About the author: Cindy Jutras is a widely recognized expert in analyzing the impact of enterprise applications on business performance. Utilizing over 35 years of corporate experience and specific expertise in manufacturing, supply chain, customer service and business performance management, Cindy has spent the past 7 years benchmarking the performance of software solutions in the context of the business benefits of technology. In 2011 Cindy founded Mint Jutras LLC (www.mintjutras.com), specializing in analyzing and communicating the business value enterprise applications bring to the enterprise.